Strnad's CE Industries made a profit of 785 million two years ago, with Croatian railcars playing a key role

The CE industrial group, which billionaire Jaroslav Strnad began building just five years ago, is already on track to post a profit in the billions. Newly published figures for 2023 show that the group increased its gross operating profit (EBITDA) by 140 per cent year-on-year to 785 million crowns, and according to the latest estimates, it earned as much as 910 million crowns last year.

The group has long been successful in two segments – the railway industry and the ‘opportunities’ sector, comprising so-called opportunistic investments. It remained true to this pattern in 2023 as well, with growth driven primarily by the development of the railway division, as well as tolling financing for the steel company Vítkovice Steel, which accounted for roughly a third of EBITDA in 2023.

So-called tolling is an agreement whereby a selected partner, i.e. a tolling company, finances the manufacturer’s operations, for example by purchasing materials and the like. The plant then manufactures the final products, delivers them to the tolling company in return for a processing fee, and the tolling company usually sells them on the market itself. In the case of Vítkovice Steel, this role was played by Jaroslav Strnad’s CE Industries group. However, this form of cooperation came to an end at the end of 2023.

The Croatian wagon manufacturer Đuro Đaković therefore played a key role in last year’s results. According to preliminary results, the entire railway division generated an operating profit of over 400 million crowns, almost half of the total estimated EBITDA.

Wagons, wagons, wagons

Strnad, in collaboration with the Mater family’s Promet Group, bought Đuro Đaković out of insolvency at a time when it was completely paralysed by debt. Today, it is one of the largest manufacturers of freight wagons in Europe. “We are fulfilling the restructuring plan and should be approaching the 1,000-wagon sales mark this year. We are now the third-largest player in the European market in terms of the number of wagons produced and the portfolio we offer,” Pavel Maroušek, head of Đuro Đaković, told Hospodářské noviny at the end of the year.

The market leader is Strnad’s former business partner Alexei Beljajev and his Tatravagonka, followed by the American firm Greenbrier, which has branches in Poland and Romania. The former produces around 6,500 freight wagons a year, whilst the latter churns out approximately 4,500 units for the European market each year. According to Maroušek, major Western European manufacturers no longer exist – they have gone bankrupt – and production is now taking place in Central Europe, South-Eastern Europe and, by extension, Turkey. In total, 15,000 to 18,000 railway wagons are produced in Europe each year, and CE Industries currently controls around five per cent of the European market.

Production set to grow

“In a few years’ time, two thousand railway carriages a year will be rolling off our production lines. And by 2028, we want to increase this figure even further,” writes CE Industries in its 2023 annual report.

CE Industries’ Chief Financial Officer Jiří Rabiec agrees, but adds that the aforementioned ancillary services also play a significant role in the sector, reducing the group’s susceptibility to economic cycles.

This year, the tolling partnership with Liberty Ostrava, as well as the integration of the Helicopter Alliance group, will have a significant impact on the results. Following the merger with Helicopter Alliance, and excluding tolling, we are targeting an EBITDA of 1.45 billion crowns.